SMM Morning Comments (Dec 23): Base metals on SHFE and LME fell acorss the board as coronavirus variant overshadowed stimulus optimism

SHANGHAI, Dec 23 (SMM) — Nonferrous metals on SHFE and LME all traded lower on Wednesday morning, as worries about a new coronavirus strain detected in the UK, which is more transmissible than the original virus, overshadowed optimism over the passage of a US economic stimulus package. 

Shanghai base metals all closed lower in overnight trading. Nickel tumbled 3.53% to lead the losses, zinc slumped 2.38%, copper declined 1.35%, aluminium shed 0.93%, lead pulled back 0.45% and tin slid 0.24%. 

The LME complex, except for lead, also cruised lower on Tuesday. Lead, the best performer, added 0.41%, while nickel dived 3.69%, copper slid 1.64%, aluminium slipped 1.63%, zinc plunged 2% and tin edged down 0.08%. 

Copper: Three-month LME copper fell 1.64% to close at $7,746/mt on Tuesday. The most-traded SHFE 2102 copper contract shed 1.35% to end at 57,710 yuan/mt in overnight trading.

Concerns about a coronavirus variant raging in Britain that has caused lockdowns and travel restrictions have dampened optimism about a U.S. stimulus bill that Congress passed overnight. Risk appetite took a hit, and the US dollar index touched 90.718. Increased risk-off sentiment weighed on copper prices.

LME copper is expected to trade between $7,730-7,810/mt today, and SHFE copper between 57,600-58,100 yuan/mt, while spot copper will be traded between discounts of 80 yuan/mt and flat.

Zinc: Three-month LME zinc came off an intraday high of $2,853/mt to a two-week low of $2,768.5/mt, before regaining some ground to close down 2% at $2,791/mt on Tuesday, with open interest rising 2,031 lots to 235,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,450 mt or 0.7% to 206,875 mt. Worries about the new Covid variant in Britain boosted risk-off sentiment. Besides, US sales of existing homes declined more than expected in November, and consumer confidence index also missed expectations. These weighed on LME zinc. But the passage of a US economic relief package by the Congress is expected to limit downward space for zinc prices. LME zinc is expected to fluctuate between $2,790-2,840/mt today.

The most-liquid SHFE 2102 zinc contract slumped 2.38% to settle at 21,300 yuan/mt in overnight trading, after earlier hitting a one-week low at 21,280 yuan/mt. An SMM survey showed that rising prices of steel products and natural gas further narrowed profits at galvanising producers in north China, and drove some of them to reduce or suspend production, which weighed on SHFE zinc.  The February contract is likely to move between 21,300-21,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 100-130 yuan/mt against the January contract.

Nickel: The most-traded SHFE nickel contract has switched from the February contract to the March one. The March contract tumbled 3.53% to end at 124,160 yuan/mt in overnight trading, with open interest increasing 5,687 lots to 124,000 lots. Fundamentals of SHFE nickel have improved recently, but strong risk-off sentiment still pervades in markets.

Lead: Three-month LME lead added 0.41% to close at $1,960/mt on Tuesday, after hitting a more than one-month low at $1,929/mt earlier in the session.

The most-liquid SHFE 2102 lead contract ended 0.45% lower at 14,345 yuan/mt in overnight trading.

Tin: Three-month LME tin edged down 0.08% to settle at $19,945/mt on Tuesday. The dollar rose on Tuesday in thin trading. Tuesday’s data was weaker than expected, with U.S. existing home sales falling more than expected in November and the consumer confidence index lower than forecast. The weak U.S reports reinforced the dollar’s rally. Meanwhile, an $892 billion COVID-19 aid package passed by Congress is awaiting President Donald Trump’s approval to become law. Some analysts though said the relief package has already been priced in the market and therefore the impact has been muted. LME tin is expected to trade between $19,600-20,300/mt today.

The most-liquid SHFE 2102 tin contract weakened 0.24% to end at 151,260 yuan/mt in overnight trading, with open interest decreasing 1,084 lots to 25,626 lots. Support below will be seen from the 150,000 mark today.